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RFD- 3376 Business Items   Item #   10. b.    
Regular Council Meeting Agenda
Meeting Date: 08/13/2018  
Title:    Tri-Municipal Organics Processing Waste to Energy Feasiblity Study - Levasseur
Department: Planning & Infrastructure  
Strategic Vision Element: Where People Choose to Live - A dynamic city with an exceptional quality of life Related Goal: Citizens consistently express high levels of satisfaction with municipal services.

Information
Request for Decision Summary
From 2016 to 2017, Spruce Grove participated with the Town of Stony Plain, Parkland County, and Alberta Innovates to examine the feasibility of waste to energy organics processing that would be suitable for a medium size municipality. Extensive research, at the time, indicated that the Anaerobic Digestion technology was proven, however the basis for its success was that the municipalities were able to secure between 25 and 50 percent grant funding. This information was brought to the three councils in 2017 and additional information was requested to further examine the economics, site selection, available grants, and if the City of Edmonton would take the organic materials. The result of this additional work was scaling back the original plant design and a move to offtake gas for energy (which is a requirement for grant funding) which did not make the plant economically viable.This second look at the costs, the availability of grants and a desire for a private partner to lead a project like this, put a considerable risk on the three municipalities. Other options and opportunities may be developing, but this work did provide an excellent foundation for understanding the process of waste management in the Tri-Municipal Region.

Proposed Motion
That the Tri-Municipal Organics Processing Waste to Energy Facility Feasibility Study Project report be received as information and the project be concluded.
 

Background/Analysis
In October and November of 2016, each of the councils of Spruce Grove, Stony Plain and Parkland County were informed of the results of the two years of research and analysis related to the design and feasibility of a waste to energy organics processing facility for the Tri-Municipal Region.

Key deliverables of the project included the following:
  • a waste characterization study addressing quality, quantity, and control of municipal solid waste in the Tri-Municipal Region;
  • an economic modelling of the facility and best siting location;
  • a technology review;
  • a governance review; and
  • a preliminary front and end engineering design (pre-FEED) study.
The facility would include a “dirty” materials recovery facility (MRF) and an anaerobic digester (AD) that would convert mixed organic materials into high quality compost. This process creates gas that can be utilized for electricity that would both operate the plant and feed the grid with a form of renewable power.
The pre-FEED study provided a higher level cost estimate than a standard concept design level of analysis would (cost level C) and estimated the facility design capital cost at $55.3 million. Total annual costs for the facility were $6.2 million. The facility would process 40,000 tonnes of municipal solid waste (MSW) annually at $141/tonne at optimum operating capacity.     
At each presentation to the respective municipal councils, the team was requested to follow up with additional investigation and analysis covering the following areas:
  • would the City of Edmonton accept regional organics into their system and at what cost;
  • conduct additional financial/economic analysis based upon each municipality's current operational costs;
  • investigate the availability of grants that may be available to support this project;
  • conduct a risk and benefits analysis on governance options; and
  • conduct an examination of availability of land for the construction of the facility.
Since the final reports were completed, Alberta Innovates had Morrison Hershfield (the consultant that developed the original pre-FEED study) complete a value engineering review of the design to re-evaluate the cost estimates. A revised capital cost estimate of $45.7 million for the facility without removing the functionality of the original design was arrived at.
The project team updated the original project charter and used the balance of the original grant funding to conduct their work in 2017 and early 2018. The results are provided below for each area of investigation.

Would the City of Edmonton accept regional organics into their system and at what cost?
In 2017, Edmonton offered to accept source-separated organics from the Tri-Municipal Region for processing at a rate of $50 - $65/Tonne (collection to start in March 2018). There were roof issues at the organics processing facility however, and there is no longer an offer to accept organics.

Conduct additional financial/economic analysis based upon each municipality's current operational costs
In April 2017, the Town of Stony Plain engaged InnoTech Alberta, a Division of Alberta Innovates, to review the documents collected to date, together with data on the current residential waste collection, to provide a more detailed economic analysis and feasibility of the plant and operation. Based upon their November 2017 report and April 2018 presentation the following conclusions were made:
  • the Tri-Municipal Region does not have adequate waste feedstock to supply the project at only 49.1% (Spruce Grove has 22.3%, Stony Plain has 10.9% and Parkland County has 15.9%;
  • existing source-separated organics in Spruce Grove and Stony Plain likely reduce the inherent value of the MRF;
  • the proposed facility would require 50% capital support and $20/GJ to make it economically sustainable at $60/tonne;
  • economics are more favorable for the digester than MRF but increased scale and more source-separated organics feedstock is required; and
  • the facility would require feedstock from other locations, such as the west end of Edmonton, to be viable.
Investigate the availability of grants that may be available to support this project
In August 2017, a study was undertaken of available grants that may support a Tri-Municipal organics facility. Achieving 50% of the capital costs through grants would require a total of $22.5 million in funding based upon a total project cost of $45 million. The review found that achieving 25% is possible, but difficult and unpredictable, and with higher percentages even more so. Concerns identified include:
  • limited number of grants available;
  • restrictive project eligibility requirements;
  • relatively short notice of grants and timeframes to apply for grants;
  • limited total dollar value pool of grants; and
  • funding caps often at about $5 million or no more than one third of the total project cost.
The probability of successfully applying for and winning enough grants to achieve 50% of the capital costs through grants appeared unrealistic. Since the development of this report further Federal and Provincial Green Infrastructure funds have become available, however timeframes for accessing these are again short.

Conduct a risk and benefits analysis on governance options
There are two primary considerations regarding the governance options: the framework for decision making and the degree of public control and risk.
The governance review identified and compared several governance models divided among whether the model was a separate legal entity or not. The separate legal entities generally ranked higher than models established by agreement, co-owned, or ran through a board or committee.
 
These non-separate legal entity models did not operate independently, could not obtain financing from non-municipal sources, had increased municipal liability, and could not own land directly having to rely on participating municipalities.
 
For comparison, the top ranked separate legal entities, such as municipally controlled corporations and regional service commissions:
  • are able to obtain financing and own land;
  • allow participating municipalities to provide strategic, high level input;
  • operate independently of their partnering municipalities;
  • can provide services to other municipalities;
  • can contract directly with private companies; and
  • limit municipal liability and financial risk.
Among these two models, the municipally controlled corporation ranked slightly better but is unable to obtain financing from the Alberta Capital Financing Authority. The regional services commission ranked second, as it is more rigid and difficult to change once established and does not allow for proportional ownership and cannot generate and distribute profits compared to the municipally controlled corporation. It can however receive funding from the Alberta Capital Financing Authority.

Each of the governance models described above involve joint ownership. An alternative to this would be a scenario where one municipality would own the facility exclusively. Under this scenario other municipalities would be able to use the facility, usually by agreement. The revenues, costs and risks of the facility would reside in the municipality that owns the facility, unless additional arrangements were in place that spread these aspects among partners. This would lead to an arrangement that functions similarly to the non-separate legal entity models aforementioned.

Private ownership of the facility is a completely different approach that could be incorporated into most of the models. Municipalities would enter into separate service contracts with the private owner or may enter into a joint contract via one of the models. This setup would reduce municipality’s transparency, accountability, control and input, and there would need to be market interest in the project for success. This private-public partnership approach however substantially reduces risks to municipalities, or a jointly-owned separate legal entity, as the private business would directly take on the funding of the project.

The benefits and risks between the various governance models are a balance between control and flexibility versus financial and operational risks. On the one extreme, a municipally-owned facility ran through a committee would allow a great deal of control and flexibility but would place a considerable financial risk on the municipality or municipalities that own the facility. Whereas a public-private partnership ownership approach, using a municipally controlled corporation framework, would limit the control and input participation that municipalities have, but would significantly reduce any of their financial risk.

Conduct an examination of availability of land for the construction of the facility
Upon conclusion of the initial reports, a site selection tool was developed by partners at the University of Alberta and utilized to identify priority areas for potential facility siting based on a number of landscape-level factors. One of the priority areas identified was on a parcel of Municipal Reserve land owned by Parkland County within the Acheson Industrial Area. This was where the pre-FEED study developed the initial facility designs. The project team was prepared to develop a further site selection matrix based on additional local factors such as land cost, available services, community impact and ownership; however this tool was not pursued after the unfavourable results of the first four Council-requested items were realized in an attempt to streamline the process and reduce project impact on staff capacity.

Conclusion
Upon further exploration of these items, pursuing a municipality driven organics processing facility for the Tri-Municipal Region does not appear to be feasible. The funding requirements alone limit the ability of a regional organics facility, especially with limited grant funding opportunities and constraints on funding amounts. Alternatives, like using Edmonton’s waste facility, also do not appear to be available. Although the various governance models offer different tradeoffs, none allow for a great deal of control and flexibility while minimizing financial risks.

Crucially, the results of the economic analysis show that the market conditions make the financial feasibility of this technology at this proposed scale quite risky unless several market factors align and a slight redesign of the proposed facility concept plan occur. This would include but is not limited to the current carbon levy increasing and additional support from gas taxes or other infrastructure funds.

One promising avenue for organics is the potential for a private waste to energy facility to be constructed. This facility would require little direct involvement of the Tri-Municipal Region municipalities except to use the region’s organics as a fuel source for its operations. If the facility becomes operational it would present an easy means by which to increase waste diversion of the Tri-Municipal Region, while reducing greenhouse gas emissions from waste.
Options/Alternatives
N/A
Consultation/Engagement
There has been consultation with Alberta Innovates, InnoTech Alberta, the City of Edmonton Waste Management Centre, and the Government of Alberta Environment and Parks Ministry.
Implementation/Communication
N/A
Impacts
Attachments
Tri-Muni Waste Facility Analysis
Grant Funding Report
Tri-Municipal Organics Processing Waste to Energy Feasiblity Study Presentation

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